Insurer Must Pay Third-Party Compensation First, Then Recover from the Owner for the Driver’s Invalid Licence

The claimants, the widow and six children of Thirthamalai, sought compensation under Section 166 of the Motor Vehicles Act, 1988, after he died from injuries sustained when a lorry struck him on 17 August 2016

The Tribunal found the lorry driver negligent, awarded ₹11,65,360, and directed the insurer to pay

The insurer appealed, challenging negligence, the dependency deduction and its liability because the driver lacked a licence to drive a transport vehicle on the accident date; the claimants cross-objected, seeking enhancement

Whether the accident resulted from the lorry driver’s negligence

Whether the driver’s lack of a valid licence to drive a transport vehicle breached the policy and entitled the insurer to recover from the vehicle owner after paying the claimants

Whether the Tribunal’s assessment of compensation required enhancement, including the income and dependency calculation

Section 166 of the Motor Vehicles Act, 1988, provides the basis for a claim for compensation arising from a motor accident, while Section 173 provides for an appeal to the High Court; Order 41 Rule 22 of the Code of Civil Procedure permits a respondent to file a cross-objection

For calculating compensation, the Court applied National Insurance Co. Ltd. v. Pranay Sethi for future prospects and Sarla Verma v. Delhi Transport Corporation for the appropriate multiplier

Where the driver lacked a valid licence for the class of vehicle involved, the Court applied the pay-and-recover approach: the insurer must first satisfy the third-party award and may then recover the amount from the vehicle owner

The Court upheld the negligence finding because the eyewitness testified that the deceased was walking along the roadside when the lorry struck him, and the insurer produced no contrary evidence

The licence extract showed that the driver was authorised to drive a transport vehicle only from 2021, although the accident occurred in 2016; the Court therefore found a policy breach but required the insurer to pay the claimants first and recover from the owner

On quantum, it found the Tribunal’s monthly income estimate of ₹9,000 too low for a 2016 accident and fixed income at ₹14,000, added 10% future prospects, deducted one-fifth for personal expenses, and applied multiplier 9.

This produced dependency compensation of ₹13,30,560; the Court left the other heads undisturbed

The Court enhanced total compensation from ₹11,65,360 to ₹16,40,560, with interest at 7.5% per annum from the claim-petition date until deposit

The insurer was directed to deposit the amount, less any sum already deposited, within eight weeks and then recover it from the vehicle owner; the Tribunal’s apportionment and disbursement directions were maintained